NetApp Will Continue to Grow Its Storage Market Share

NetApp (NASDAQ:NTAP), which competes with EMC (NYSE:EMC), has reported market share gains in its storage market, driven by strong sales for low-end as well as high-end storage hardware. These gains have mainly come at the expense of players like HP (NYSE:HPQ), Dell (NASDAQ:DELL), Hitachi (HIT), and IBM (NYSE:IBM).

NetApp makes money by selling storage hardware and software primarily to small and medium sized businesses. We estimate storage hardware constitutes close to 23% of the $30 Trefis price estimate for NetApp’s stock. We expect that NetApp will continue to gain market share in the storage hardware market as a result of demand from medium-sized business and cloud storage providers.

With more medium-size companies embracing virtualization to make data storage efficient and economical, NetApp’s storage hardware (which is highly compatible with VMware’s virtualization software) will continue to do well.

In addition, NetApp, Cisco (NASDAQ:CSCO) and VMware (NYSE:VMW) have recently come together to develop a product that will solve data security issues related to virtualized infrastructure. We believe this collaboration will further benefit demand for NetApp hardware.

There is rising demand for high-end storage hardware from cloud-service providers as cloud storage becomes increasingly used by businesses. Furthermore, NetApp has introduced it Performance Acceleration Module (PAM) technology which makes its high-end storage perform even faster.

More than 10% of NetApp’s hardware shipped is built on PAM technology, and we believe this shift will drive growth for NetApp’s high-end storage hardware in the future.

You can modify the forecast above to see how NetApp’s stock price would be impacted if it were to gain more share in the hardware storage market than we estimate.